12 ONE ON ONE AN EYE FOR ENERGY ROBERT EBEL Robert Ebel helps put things in global perspective BY DAVID PYE For three centuries, global reliance on energy has grown phenomenally. Energy, especially oil, has been the lifeline of progress, fuelling industrialization, military strength and international politics. Foreign policy is directly influenced by energy politics, and oil has become a source of power and its acquisition has become the focus of national security. Society often takes oil for granted, despite the vulnerability of supply. Nothing lasts forever, though, and depletion of traditional sources, unstable regimes and any number of other international events can directly affect the integrity of the world s oil supply. 10 HEC Montréal MAG Automne 2003

13 DEPLETION IS BECOMING A VERY IMPORTANT PROBLEM. F or over 40 years, Robert Ebel has been monitoring the global energy situation, conducting political and financial risk assessments as a member of Enserch Corporation, the Central Intelligence Agency, the U.S. Department of the Interior and the U.S. Federal Energy Agency. Today, Mr. Ebel serves as Director of the Energy Program for the Center for Strategic and International Studies (CSIS), where he continues to monitor issues of global energy concern. He is the author of Chernobyl and Its Aftermath (CSIS, 1994), Energy Choices in Russia (CSIS, 1994) and Energy in the Near Abroad (CSIS, 1997). His work is essential to monitoring the potential for disruptions in the balance of supply and demand of oil to the United States and abroad. He predicts that the next 20 years will see a 50% increase in the global demand for energy, led by developing nations that will increase their consumption by as much as 130%. According to Mr. Ebel, demand from the United States and China alone by the end of 2030, if not earlier, will surpass the current production capacity of all OPEC nations combined. During his recent Canadian speaking tour, HEC Montréal had the privilege of hosting Robert Ebel for a most informative presentation, followed by a one-on-one question and answer period where MBA Energy students also expressed their views. HEC MONTRÉAL MAG: What is the single biggest concern when it comes to monitoring the security of global energy today? ROBERT EBEL: The first thing that always comes to mind is Saudi Arabia. What would happen if there was civil unrest in Saudi Arabia, or any number of other events that would negatively impact the amount of oil that they could produce and deliver to the world market? That is our greatest concern today. Everybody not just the United States would suffer immediately, simultaneously. There is no current way to replace losses of Saudi oil. While there is a little bit of spare producing capacity available from the other members of OPEC, it s not enough to offset any reasonable loss. HEC MONTRÉAL MAG: What sort of strategy would the United States need to deploy in that kind of situation? ROBERT EBEL: We would have to tap into our strategic petroleum reserves, as would Europe and all of the other members of the OECD (Organization for Economic Cooperation and Development). Each member of the organization is supposed to have the equivalent of a 90-day supply on hand in the event of an emergency, so we would all have to turn to these reserve stocks to offset any loss. However, human behaviour being what it is, there would be a tendency to ration the reserves because of uncertainty about what other disruptions might take place. That would create a continuing supply problem, keeping prices high. Once demand comes down, there would eventually be a restored balance between supply and demand, but we would certainly be faced with the prospect of a world recession. HEC MONTRÉAL MAG: In an emergency, how long would the strategic reserves of the United States last? ROBERT EBEL: We have Strategic Petroleum Reserves of 600 million barrels, and we consume about 20 million barrels of oil a day. However, the equation doesn t relate to the amount of oil you consume. We import 12 million barrels of oil a day, but you don t relate it to that either. In order to properly assess that situation, you need to look at the sources of oil providing your imports. Not all of them will be denied to you. Perhaps oil from Canada will continue, as will oil from Venezuela and Mexico. So we might have to only worry about 3-4 million barrels of oil a day. Then you relate that to the 600 million, and that will carry you for quite a long time. HEC MONTRÉAL MAG: How much of the U.S. oil supply is currently imported from Canada? ROBERT EBEL: Canada provides about 1.8 million barrels of oil a day, and one-sixth of the natural gas consumed by the United States. HEC MONTRÉAL MAG: You spoke about the depletion rates of some of the world s key oil-producing regions. How much of an immediate concern is depletion? ROBERT EBEL: Depletion is becoming a very important problem. Statistics indicate that the Alaskan North Slope, a major source of oil exploration and production, appears to be depleting at a rate of 18% annually, while North Sea oil is depleting at 15%. Venezuela is seeing a depletion rate of as much as 20% annually, while the Gulf of Mexico leads the way at an alarming rate of 25%. No oil field will last forever, and some of them are getting old. The key is to spread out the decline as long as we can, but strategies are vulnerable to world events. If world prices become low, oil producers won t be able to afford the cost of slowing down their production rate. HEC Montréal MAG Automne

14 ONE ON ONE HEC MONTRÉAL MAG: How has the U.S. Government approached that situation? ROBERT EBEL: We have been looking particularly closely at the Caucasus. We ve taken steps in Georgia, Armenia and Turkmenistan to do what we could to help ensure political and financial independence that would keep them from moving back towards a relationship with Russia. We have worked closely with countries in the region to develop their oil and gas industry, and that effort has been particularly successful in places like Azerbaijan and Kazakhstan. HEC MONTRÉAL MAG: Are there any emerging relationships between the United States and other oil-producing nations? ROBERT EBEL: Currently, we are paying more attention to West Africa, particularly Angola and Nigeria. Both nations are major oil producers and exporters, and they will continue to expand those efforts. If you look at a map of the region, you ll see that there is easy access from West Africa to the east coast of the United States. Their oil is produced offshore, and that allows the loading of tankers directly. HEC MONTRÉAL MAG: Are there specific areas where you feel that Canada is taking positive initiatives to maximize its energy potential? ROBERT EBEL: I think that Canada understands that the production of its conventional oil is starting to decline. As a result, they recognize the need to develop the oil sands more rapidly. That is a real possibility today due to advances in the technology. HEC MONTRÉAL MAG: In that case, what is the global outlook for new oil exploration? ROBERT EBEL: Once again, that depends on a number of factors. When prices are high, countries that have oil potential actively seek out investors. However, they often look at high prices as an opportunity to lay some pretty tough terms on the table. These terms are sometimes too strict for the typical oil investor. When prices are low, they are eager to attract foreign investors, and the terms are far more attractive. HEC MONTRÉAL MAG: Where do you see the biggest potential for change in terms of increased production? ROBERT EBEL: There is some increase expected in Russia, but it always comes back to the Persian Gulf. The Persian Gulf has to carry the burden. HEC MONTRÉAL MAG: With the world oil market being so closely tied to global events, how has the break-up of the Soviet Union affected the supply of oil from that region? ROBERT EBEL: Before the dissolution of the Soviet Union, we had just one government to deal with. One morning we woke up and had 15 governments to deal with. That has greatly complicated the issue politically. HEC MONTRÉAL MAG: What effect will increased development of the oil sands have? ROBERT EBEL: As you scale up projects to convert oil sands into oil, the cost of production will come down. However, developing the oil sands will require a great deal of resources, including water, natural gas and labour. These three critical elements are in relatively short supply. HEC MONTRÉAL MAG: When your organization and your government focus on Canadian oil production, what are the key issues that interest and / or concern you? ROBERT EBEL: It s a great comfort to the United States that Canada is our largest supplier of oil. The supply has never been interrupted, and we literally take it for granted. However, Canada is also an importer of oil, relying on imports to supply the east coast while exporting production from the west. If the supply of oil coming into the east was interrupted, then Canada, under NAFTA, would be able to reduce its export of oil to the United States proportionately. 12 HEC Montréal MAG Automne 2003

15 OFF THE BEATEN TRACK CONSCIOUS LEADERSHIP PHOTO J.-A. MARTIN The s is the most important letter in the word ethics, says Professor Thierry C. Pauchant, holder of the Chair in Ethical Management. Very often ethics is confused with morality or dogmatism, but these two have a singular, not a plural, connotation. Many people confound the two concepts in their search for the right answer. BY KATHLYN HORIBE THIERRY C. PAUCHANT The professor of management has had lots of chances to see ethics from different cultural viewpoints. He was born in France and earned a master s from the Sorbonne, then continued his studies toward a PhD at UCLA and worked in New York City, Los Angeles and San Francisco. In 1988, he moved to Quebec and became a Canadian citizen. When you live in different countries, you get the opportunity to compare and contrast, to become global in your outlook. Then you start to understand the disparity in ethics, because ethics is culturally bound. In today s organizations, ethics is also being confused with deontology or values, says the founding president of the Research Ethics Committee at HEC Montréal and the co-founder of five other organizations, including the Group on Ethics and Corporate Social Responsibility. If you enforce morality, you re imposing required or like behaviours, i.e., the same cultural behaviours. If you enforce values such as equity or equality, you re imposing one conceptual way of seeing things. A third method of looking at ethics, the method I prefer, is dialoguing with stakeholders in order to understand their point of view. The fourth method is to dialogue with yourself, to become self-aware. People who are not conscious of their own attitudes and behaviours are not hearing others. Research indicates that 80 per cent of Canadian and American firms address ethical issues only through a code of ethics, i.e. a deontological code that tries to enforce behaviours. The rest, like Anita Roddick and the Body Shop, for example, are definitely dialoguing with others and with themselves. This allows them to develop paradoxical thinking, because most of the challenges in organizations are not black and white, says the author and co-author of more than 100 publications, who sits on the editing committee of six international scientific journals. He has also served as consultant to such organizations as AT&T, the CBC, the House of Commons and IBM. As the Chair, I m trying to explain to CEOs that ethics is a quest, an inquiry, says Pauchant. Ethics is a way to consider different answers, of having choices. A healthy bottom line is just one criterion, and when only that criterion is used in making decisions, this is akin to dogmatism. Some CEOs are already financing some of our projects, as they realize that this type of work is both very practical and inspiring. I also urge them to develop the ability to be anxious, without becoming anguished. The right degree of anxiety allows an individual to develop paradoxes and yet make decisions. They understand what I m talking about, yet many managers who want to become executives don t want to deal with anxiety. They want certainty; they want to achieve control. A year ago, Pauchant initiated a project called Great Consciousness Leadership, which will examine 100 outstanding leaders who tried to improve the world. The object is to study the best individuals on the planet and try to understand their behaviours, organizational skills, abilities, competencies, culture, values and habits and then publish both the individual results and an overall synthesis. It s a very interesting way to approach ethics, and different from traditional leadership studies, because we re not looking at different theories. We re examining the concrete life of mature, sophisticated people who operate at a higher level of consciousness. Many of today s business leaders unfortunately cannot be considered mature, because they confuse leadership with a title. Leadership has nothing to do with status and titles. You can be a leader without any status and people like Gandhi, Martin Luther King, Nelson Mandela, Eleanor Roosevelt, Mother Teresa and the Dalai Lama prove it. HEC Montréal MAG Automne

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